Buy Groupon stock for a double, Roth says

Following a business update from the company, Roth MKM analyst Sean McGown says he is very bullish on Groupon (Groupon Stock Quote, Chart, News, Analysts, Financials NASDAQ:GRPN).

On January 12, GRPN issued a business update in which the company said that 2023 revenue would be “close to, or above, the high-end of our guidance” and that Adjusted EBITDA would be the same.

The analyst commented on the development.

“We believe GRPN is poised for a significant improvement in its business, as measured by billings, revenue, adjusted EBITDA and Free Cash Flow,” he wrote. “The company today issued a business update indicating that 4Q results were at or above its guidance, and better than consensus estimates. We expect positive surprises to continue in 2024, although we now expect the improvement to be more second-half weighted. Our estimates remain materially above guidance and consensus.”

In a research update to clients January 12, McGowan reiterated his “Buy” rating and price target of $28.00, implying a return of 119.3 per cent at the time of publication.

McGowan thinks GRPN will generate EBITDA of $57.3-million on revenue of $518.1-million in fiscal 2023. He expects those numbers will improve to EBITDA of $115.6-million on a topline of $548.2-million the following year.

“GRPN’s current valuation implies an EV/Revenue multiple of 1.1x our 2024 revenue estimate and 1.0x our 2025 revenue estimate,” the analyst concluded. “Looking at our Adjusted EBITDA estimates, the EV/EBITDA multiples are 5.4x (’24) and 4.2x (’25). We believe that a year from now, the stock will trade at an EV/Revenue multiple of at least 1.2x our 2025 revenue estimate of $599M, and an EV/EBITDA multiple of at least 4.8x our 2025 Adjusted EBITDA estimate, which supports our $28 price target.”